Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodologies, including key rating assumptions and models. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for POP NPLS 2020 S.r.l. on 10 December 2021. The credit ratings remain as follows:

Class A (ISIN IT0005431900), EUR 193,031,448: BBB_SF

Class B (ISIN IT0005431918), EUR 25,000,000: CC_SF

Class J (ISIN IT0005431926), EUR 10,000,000: not rated

POP NPLs 2020 S.r.l. is a static cash securitisation of a EUR 920m portfolio (at closing) of Italian non-performing loans originated by 15 banks. The portfolio is serviced by Special Gardant S.p.A. (successor of Credito Fondiario S.p.A.) (‘Special Gardant’) and Fire S.p.A. (‘Fire’) as special servicers, and Master Gardant S.p.A. (successor of Credito Fondiario S.p.A.) as the master servicer. The transaction was closed on 23 December 2020 and the legal maturity is November 2045. Scope does not rate the class J notes.

The review was conducted considering available servicer reports, payment reports and investor reports up to November 2021 payment date. This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

As of 30 September 2021, aggregate gross collections were EUR 55.5m, which is 153.8% of the original business plan gross expectations up to that date (EUR 36.1m). Total gross collections are mainly split ad-interim and other actual collections (52.5%), judicial proceeds (26.3%) and discounted payoffs (20.5%).

Around 85% of the total gross collections come from open debtors (i.e., borrowers for which the recovery process is still ongoing). The servicers have closed debtors for a total gross book value of 2% of the transaction’s initial gross book value: both Special Gardant and Fire have closed approximately 2% of the portfolio’s gross book value under their management.

Class A has amortised by 20% since the issuance date. No interest subordination event for class B have occurred. The Net Cumulative Collection Ratio and the Net Present Value Cumulative Profitability Ratio stood at 153.6% and 113.6%, respectively, above the 90% threshold for the interest subordination event.

Profitability of closed debtors (i.e. positions for which the recovery procedure was closed) is below Scope’s baseline scenario. However, given that resolved borrowers represent a limited portion of the transaction’s initial gross book value (2% of total GBV) and timing of related collections has been slightly shorter than expected, the impact is not currently material for the transaction. Relative with Scope’s baseline scenario, Special Gardant has closed borrowers with a higher profitability than Fire. However, the latter mainly services an unsecured portion of the portfolio and has higher profitability on unsecured and junior secured positions closed thus far. Scope will closely monitor the evolution of resolved borrowers’ profitability over time.

All transaction counterparties continue to support the ratings.

CREDIT-POSITIVE (+)

Cumulative net collections timing. Aggregate net collections (net of recovery expenses) stand at EUR 55.5m as of the latest reporting date and have outpaced Scope’s timing expectations.

Cumulative net profitability against business plan. Cumulative net present value profitability ratio stands at 114%, indicating higher profitability than the business plan on a net present value basis. By servicer, this ratio stands at 111% for Special Gardant, and 123% for Fire.

CREDIT-NEGATIVE (-)

Italian economy. The Italian economy faced a weak economic growth rate in the first half of 2021 fuelled by the Covid-19 pandemic. Despite governmental support measures, increased collateral liquidity risk and weakened borrower liquidity positions could negatively affect the recovery prospects.
Profitability relative to Scope’s expectations. Profitability on closed positions is currently below Scope’s baseline scenario. For the limited number of secured positions closed by Fire, we note that profitability is also significantly below Scope’s stressed assumptions applied for the analysis of class A notes.

The methodologies applicable for the reviewed rating (General Structured Finance Rating Methodology, published on 14 December 2020, Non-Performing Loan ABS Methodology, published on 6 August 2021, Methodology for Counterparty Risk in Structured Finance, published on 13 July 2021) are available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Chirag Shekhar, Analyst.

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